The Society for Economic Research on Copyright Issues

Review of Economic Research on Copyright Issues (RERCI)

RERCI Articles

Bargaining Theory and Royalty Contract Negotiations

Review of Economic Research on Copyright Issues, Vol. 3, No.1, 19-27, 2006

Abhinay Muthoo

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Abstract

This article shows how the principles of modern bargaining theory can help develop a better understanding of contractual terms such as royalties between copyright holders and users such as between an artist and a recording company (or between an author and a publisher). We develop the main principles in a non-technical and illustrative manner.

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The U.S. Copyright Termination Law, Asymmetric Information, and Legal Uncertainty

Review of Economic Research on Copyright Issues, 2019, vol. 16(1/2), pp. 1-39

Michael Karas

Downloads:  1322


Abstract

This paper investigates the conflict between authors and their publishers that occurs as a result of publishers using an ambiguous “work made for hire” clause to sue the author for copyright infringement. A Bayesian signaling model allows a publisher to send an informative signal to the uninformed author that includes his reaction towards a license termination to induce termination deterrence. The model is used to examine the effectiveness of the statutory intervention. The results reveal that complete termination deterrence is an equilibrium outcome only if a publisher sues with certainty. The mere threat to sue is not sufficient for complete termination deterrence. Under most parameter settings, the results indicate positive termination probabilities. The highest probability for a neutral publisher type is obtained in situations where an author has weak outside options or is strongly dependent on his publisher. An author with valuable outside options increases the probability that a publisher will threaten to pursue legal action. If courts tend to favor authors, then termination incentives increase, which may lead to more friction between authors and their publishers.

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Fair Copyright Remuneration: The Case of Music Radio

Review of Economic Research on Copyright Issues, Vol. 7, No. 2, 21-37, 2010

Richard Watt

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Abstract

The issue of what price should be set for the music input to radio broadcasts has been hotly debated recently in several countries, including USA, Canada and New Zealand. Since music is subject to copyright, this is an issue that is of great importance to the economics of copyright. The central point is the fact that, because of the economic efficiency that is gained by collective management and blanket licencing, the copyright holders in music are represented by a single bargaining unit. The ensuing monopoly power is often seen to be detrimental to social efficiency, and so in exchange for allowing the collective to form and operate, the price at which it grants access to its repertory is regulated. The regulated price should be set at a fair and equitable level. In this paper, the Shapley methodology is used to attempt to provide such a tariff.

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Copyright and Creativity: An Application of Cultural Economics

Review of Economic Research on Copyright Issues, Vol. 3, No. 2, 83-91, 2006

Ruth Towse

Downloads:  1309


Abstract

This paper argues that the emphasis by policy-makers on creativity and economic growth in the creative industries, fostered by copyright law, is not well grounded and cultural economics gives little support for these policies.

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What We Know, What We Don't Know, and What Policy-makers Would Like Us to Know About the Economics of Copyright

Review of Economic Research on Copyright Issues, Vol. 8, No. 2, 101-120, 2011

Ruth Towse

Downloads:  1302


Abstract

There are many gaps between what economists know and what they don't know. This article reviews this situation in the light of what policy-makers say they want to know about the economic effects of copyright. The article sets out what I see as misunderstandings on the part of policy-makers as to what economics can offer in the way of evidence on copyright. The paper is based on my limited experience of advising and consulting as well as on reading calls for evidence in policy documents.

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Why Did Schumpeter Neglect Intellectual Property Rights?

Review of Economic Research on Copyright Issues, Vol. 2, No. 1, 69-74, 2005

Mark Blaug

Downloads:  1294


Abstract

Joseph Schumpeter is the father of evolutionary economics and the origin of notion that technical change is the key to capitalism as an engine of economic growth. His most famous book is Capitalism, Socialism and Democracy (1942) which develops the thesis that capitalism is always an evolutionary process of creative destruction. When this book was published fifty years ago, there was little solid scholarship on technical advance. Now there is a great deal, so much so that it would take a book to do justice to it. Nevertheless, Schumpeter's book correctly captures many of the stylised facts about technical progress revealed in recent research but, oddly enough, he never discussed, or even mentioned, intellectual property rights and this despite the fact that patent legislation was a prominent subject of debate in nineteenth century economics. This is a puzzle I hope to resolve in this paper.

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Accounting for Creativity: Lessons from the Economic History of Intellectual Property and Innovation

Review of Economic Research on Copyright Issues, 2020, vol. 17(1), pp. 1-37

B. Zorina Khan

Downloads:  1280


Abstract

Social progress depends on the realization of inventive ideas, and economic history provides valuable lessons about creativity in technology and culture. The empirical study of over one hundred thousand innovative individuals who obtained patents, copyrights, and prizes, sheds light on the relationship between institutions, incentives, and transformative ideas and expression, over the past two centuries. The European growth model assumed useful knowledge was scarce, and top-down administered innovation systems offered rights and rewards to "exclusive" groups. By contrast, American policies regarded creativity as widely distributed in the general population, and further promoted "inclusive" market-oriented mechanisms that fostered diversity in ideas and outcomes. The evidence suggests that property rights in patents facilitated markets in ideas, and ensured that returns were aligned with productivity and market demand. Whereas, such administered systems as innovation prizes and publisher's copyrights in the "creative industries" benefited the few rather than overall social welfare.

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Indirect Copyright Infringement Liability for an ISP: An Application of the Theory of the Economics of Contracts under Asymmetric Information

Review of Economic Research on Copyright Issues, 2018, 15(2), 57-79

Richard Watt and Frank Mueller-Langer

Downloads:  1255


Abstract

Under current copyright law in many countries, Internet Service Providers (ISPs) can be found liable for the traffic on the websites that they host. While the ISPs themselves are not undertaking acts that infringe copyright, indirect liability asserts that they either contribute to, or encourage in some way, infringing activities, and thus they are liable to claims of indirect involvement by the affected copyright holders. The present paper explores indirect liability in a standard principal-agent setting, where both moral hazard (the act of monitoring) and adverse selection (differential costs of monitoring over ISPs) are present. The model considers the kinds of contracts that could be signed between the copyright holders (acting through a collective) and the ISPs (acting individually). We specify the contracts that are self-selecting and incentive compatible for the set of feasible scenarios.

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The 'Competitive' Value of Music to Commercial Radio Stations

Review of Economic Research on Copyright Issues, Vol. 4, No. 2, 29-50, 2007

Paul Audley and Marcel Boyer

Downloads:  1253


Abstract

Our objective in this paper is to develop a methodology to infer from the behaviour and choices of broadcasters the "competitive" value they attach to the use of music, more precisely sound recordings, and to derive from such an inferred value the proper "competitive" copyright payments to be made to authors, composers, performers, and makers of sound recordings. We illustrate the methodology by applying it to Canadian data. The background is provided by the statement of case and supporting proof presented in the 2004 proceedings before the Copyright Board of Canada on the commercial radio tariff. The results called for a significant increase in copyright payments by Canada's commercial radio industry: the proper competitive copyright payments should be substantially more than double what the industry was paying at the time of the hearings.

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Copyright Auctions and the Asset Value of a Copyright Work

Review of Economic Research on Copyright Issues, 13(2), 83-99, 2016

Ruth Towse

Downloads:  1221


Abstract

Research on the economic history of copyright and music publishing turned up an unusual source of data on the value of copyrights, namely detailed accounts of public auctions of musical items that were held in London between 1794 and 1960 of, inter alia, copyrights and the engraved plates from which musical works were printed. The standard contract between song writers/composers and music publishers in the 19th century bought out all rights and therefore the sale of the plates was also the sale of the copyright to the work, enabling the new owner to print and distribute the work. The sales also facilitated entry into and exit from the industry.
This paper describes the historical circumstances of copyright and the market for printed music and presents some of the more notable data, with calculations of their present day values. Though insufficient for a full statistical analysis, the paper provides some hard evidence of the asset value of copyright in musical works as perceived by the music publishers of those times. The paper also suggests a basis for further research.

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Copyright Levies as an Alternative Compensation Method for Recording Artists and Technological Development

Review of Economic Research on Copyright Issues, Vol. 2, No. 2, 25-39, 2005

Ville Oksanen and Mikko Valimaki

Downloads:  1221


Abstract

The idea of alternative compensation methods for recording artists has gained increasing popularity as Internet copying has started to seriously threaten record sales. We start this article by looking at the general theory on alternatives to copyright royalties and show that recording artist income is in practise not dependent on record sales. Then we move forward and map the features of the current alternative proposals and construct yet another iteration of a levy-based compensation method. As an example, we analyze what our model would imply for Finland. In the end we reflect on the idea of a levy-based compensation method to the current predictions of technical advances in communication networks and note that the traditional copyright royalty model is seriously threatened by tremendous personal copying covering practically all the music ever created. We conclude this article by discussing what this will mean for the alternative compensation proposals and the music industry in general.

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Evidence of the Effect of Free Music Downloads on the Purchase of Music CDs in Canada

Review of Economic Research on Copyright Issues, 9(2), 55-78, 2012

George Barker

Downloads:  1187


Abstract

This paper examines data on the effects of Internet peer-to peer (P2P) file sharing activities on music purchasing. The data was obtained from a survey commissioned by Industry Canada to "inform Industry Canada's policy development work" regarding copyright law reform in Canada. The paper focuses on an important survey question which has not yet been analysed. Analysis of survey responses suggests that P2P file-sharing is a substitute for legitimate music purchases and has strong negative effects on legitimate music purchases. This contradicts the results of earlier analysis of the data commissioned by Industry Canada first published on Industry Canada's website in 2007 (Andersen and Frenz, 2007), and then subsequently revised and republished as Andersen and Frenz (2010).

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Truce in the Copyright War? The Pros and Cons of Copyright Compensation Systems for Digital Use

Review of Economic Research on Copyright Issues, 2018, 15(2), 23-56

Christian W. Handke, João Quintais and Balázs Bodó

Downloads:  1187


Abstract

This paper discusses copyright compensation systems (CCS) -- that provide licenses for downloading and non-commercial use of copyright works in return for a fee -- in the light of welfare economics and transaction cost economics. Recent empirical studies suggest that CCS could improve social welfare at least for recorded music. The general theme of the theoretical discussion in this paper is a simplicity-flexibility trade-off. On the one hand, CCS seek to reduce the costs of administering and trading copyrights online. On the other hand, standard copyright licenses distort the market mechanism. This paper discusses the costs and benefits of various CCS proposals compared to alternative ways of managing copyright online.

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Intellectual Property Regulation and Software Piracy: A Dynamic Approach

Review of Economic Research on Copyright Issues, 2018, 15(1), 38-64

Michael D'Rosario

Downloads:  1167


Abstract

Promoting Intellectual Property Rights (IPRs) is of particular importance to nations engaging in significant innovation. The existing literature relating to software piracy research is typified by the use qualitative methods to analyse the impact of IPRs on software piracy. Most concern themselves with a handful of important macroeconomic factors in an effort to identify whether they possess any explanatory power, employing qualitative frameworks for analysis. More contemporary research has given greater attention to the role of key regulatory variables on software piracy using econometric methods. In this paper, the relationship between foreign political pressure, IPR regulatory reforms and software piracy is considered. We estimate a model of software piracy as a function of bi-lateral pressure and investment (where US 301 reporting is the proxy for bilateral pressure, and capital investment the proxy for bi-lateral investment), Scientific investment, trade dependence and government effectiveness. The models are estimated using data from 80 countries over nine years. The study responds to the dearth of research employing dynamic panel estimations in estimating the impact of IPR reforms on software piracy. The findings suggest out of cycle review and US 301 reporting are pertinent factors potentially moderating software piracy.

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Compulsory licensing for radio-play of music in India: Recent history and economic context

Review of Economic Research on Copyright Issues, 2020, vol. 17(1), pp. 60-77

Megha Patnaik

Downloads:  1158


Abstract

Compulsory licensing of sound recordings is practiced in different countries, though the trajectories and rationale for arriving at this framework may differ. Developing countries often introduce measures to protect "infant" industries, but policy persistence can make subsequent changes hard. In 2010, the Copyright Board of India passed an order prescribing 2% of net advertising revenues to be paid by radio stations as compulsory license fees to copyright owners, citing the infancy of the private radio industry and the lack of access to music in India. Since the original order, the private radio industry has matured in size, coverage and listenership. Access to music today is facilitated through a far-reaching radio network, as well as widespread mobile and internet usage. The original order will be reviewed in September 2020. Given the maturation of the private radio industry over the past decade, this paper recommends India transitioning to the perspective considered for countries with mature radio industries. But how can the regulator determine the fair price of music closest to that found in a competitive market? Several strategies demonstrated in the literature can be used to establish a baseline valuation, following which adjustments can be made to account for any spillovers between the two industries.

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